Local SMEs unaffected by ‘surging economy’

While the Philippines was receiving global accolades for its rapid economic growth that has placed the country’s GDP among Asia’s top three in recent years, it is sad to note that the small and medium industries (SMEs) which comprise over 99 percent of the Philippines’ total industries have remained relatively unaffected by the supposed thriving economy.

This can be traced to a variety of reasons that is reflective of the one-sided economic growth that has benefitted mainly the upper classes and big businesses, and little else outside their circle of influence.

Dr. Ronald Mendoza, Dean of the Ateneo School of Government, pointed out that one of the reasons why vast majority of the SMEs have been disconnected to the dynamic growth of the country is that the excellent macroeconomic state has overwhelmed the microeconomic situationer.

Risk factors

“Factors such as credit rating, upgrade in investments, excess liquidity, and the widespread preference of banks to lend to big businesses over SMEs have accounted for just some of the reasons why the SMEs have been neglected,” Mendoza said during the annual Mandaue Business Summit 2016 held at the Oakridge Pavilion in Mandaue City.

In his speech dubbed “Getting to High and Inclusive Development: Bold Moves under a Duterte Administration,” the speaker observed that banks much prefer to pay the corresponding fines for minimal loans to SMEs since such firms have been viewed by these financial institutions as risks rather than investments.

“Banks have paid nearly PhP2 billion in fines yearly for not catering to SMEs. Banks admittedly look more to big industries’ re-enlarged loan portfolios due to their perceived capability to pay back their loans promptly,” he disclosed.

Aside from this, Dr. Mendoza added that SMEs lack the proper packaging due to shortcomings in the fields of technology, public goods, and investments. Worse, unlike their overseas counterparts, SMEs are not well linked to big businesses since big business in the Philippines is not heavy in manufacturing.

This is not totally the fault of SMEs since their lack of access to capital have hampered their growth and expansion, leading to their inability and incapability to match their overseas counterparts in terms of competitiveness.

Hence, Dr. Mendoza cited the need of more Foreign Direct Investments (FDIs) to boost the manufacturing sector, the single biggest factor in the Asean region that can lift families out of their state of poverty.

“Job creation is a must. We are losing a lot of our best minds to foreign shores. I throw back the challenge to startups and managers to penetrate more export markets. Yet another problem here is the underemployment and jobs mismatch between the position and the graduate,” the speaker said.

Locally, fresh graduates are forced to work in a totally different field just to pursue a paycheck and avoid unemployment. Examples are nurses working in call centers, commerce graduates as restaurant waiters, and engineers ending up as insurance salesmen.

Mendoza also batted for the abolishment of the “endo” or end of contract hiring. This is a widespread practice among big businesses which halt the work terms of their new employees on a massive scale just short of the six-month period and embark on another huge hiring scheme to avoid the regularization of their employees.

The Mandaue Business Summit is one of the highlights of the Mandaue Business Summit as spearheaded by the Mandaue Chamber of Commerce and Industry.